What is a HECM

For many people unfamiliar with reverse mortgages, financial jargon can often appear confusing and unnecessarily complicated. Between fixed loans, line of credit loans, and for-purchase loans, there is an abundance of information available. So, what do these terms mean and why should they matter to you

The Essentials

Reverse mortgages are also known by the acronym HECM, which stands for Home Equity Conversion Mortgages.  A HECM is a great solution to financial stress. Unlike a typical mortgage, in which you make monthly payments to the lender over time, you will receive payments from the lender that correspond to the value (equity) of your home, instead. Basically, rather than having to pay your monthly mortgage bills yourself, the lender will pay off your mortgage* and you will receive payment in proportion to your home’s equity. You will still own your home*, and will not need to pay back the loan until you move out of the home, sell it, or pass away. If you are 62 years of age or older and would like to stop worrying about mortgage payments*, large bills, or would simply like to enjoy retirement to the fullest, this solution may be right for you.

As long as you or your spouse is 62 years of age or older, you own your home and it is your primary residence, and you are prepared to pay all property taxes, maintenance costs, and insurance, you have met the essential qualifications.

Choosing the Right One for You

  1. HECM Fixed Rate (Lump Sum)
    This is a convenient option for people who need to pay off their existing mortgage, meet medical bills, or satisfy other financial obligations. After closing, the money arrives as one lump sum.
  2. HECM Line of Credit
    One of the most popular and flexible options, this type of loan allows you to draw from a line of credit whenever you like or receive your money as smaller monthly sums. Monthly payments will also give you access to the line of credit, should it become necessary.
  3. HECM For Purchase
    A rather unique option, this loan allows you to purchase a new home and move in without concern for monthly mortgage payments*, allowing you to retire closer to friends and family, or in a home that better satisfies your needs.

Further Clarification
After closing the loan, your remaining mortgage will be paid (if you have one)* and any remaining money can be used as you wish! Depending on the type of mortgage you chose, you will receive either a lump sum, line of credit, or regular monthly payments. Furthermore, as long as a borrower lives in the home, the loan will not become due. If you sell the home, move, or pass away, the loan will become due, but you will never owe more than your home is worth, thanks to the Federal Housing Administration’s mortgage insurance program, which will cover the difference. This makes the loan a non-recourse loan, one amongst many safety nets provided in our process.

How a Reverse Mortgage Can Benefit You
Whether you must deal with unexpected financial trouble or would simply prefer to live your retirement with as much freedom as possible, a reverse mortgage can provide answers to both budget predicaments and retirement plans alike. If you’d like to live comfortably, free yourself from debt, renovate your home, and receive tax-free money for any use** while still retaining ownership of your home, you have options with One Reverse Mortgage.

Are you still asking yourself, “How does a reverse mortgage work?” Call us today to speak with one of our specialists for more in-depth information!

*Homeowner is still responsible for taxes, insurance and property maintenance.

**Please consult with your financial advisor.